Entain exits unregulated markets
Entain says NGR/EBITDA impact will be small, Macau junket operator ordered to pay $831m fine, Macquarie’s 2023 outlook, New Jersey December, analyst takes +More
On today’s agenda:
Entain says it is exiting unregulated markets where it sees no path to regulation.
Ex-Suncity junket operator CEO Alvin Chau receives an 18-year prison sentence.
The data from New Jersey shows the eighth straight month of handle declines.
The analysts at Macquarie make their predictions for this year.
Analyst takes: Inspired, Wynn and Boyd.
Gimme more of that Jailbird pie.
Entain says it is exiting a number of unnamed unregulated markets where it “no longer sees a path to domestic regulation”.
The company said the move is in line with its previously announced strategy that 100% of its revenues would come from markets that are nationally regulated. It said it would “accelerate the process of exiting the few remaining” unregulated markets with immediate effect.
Entain noted it remains in a “small number” of markets where the company expects changes in regulation will enable it to obtain local licensing in due course.
“With the exception of these markets, 100% of the group’s revenue will now be from domestically regulated markets where it is licensed.”
It added that the NGR and EBITDA impact from these closures is “relatively small and will have no effect on current expectations”.
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The former Suncity CEO has been sentenced to 18 years after being found guilty on multiple charges of defrauding the tax authorities.
Under the counter: Alvin Chau, the ex-CEO of Macau junket operator Suncity, will be spending the next 18 years in prison and will be forced to pay a fine of $831m after the court found him guilty of multiple charges of fraud.
The court found that Suncity facilitated ‘betting under the table’ in its VIP rooms at the properties of Wynn Macau, Galaxy Entertainment, MGM China, Sands China and SJM Resorts.
$250m of the fine will be paid to the concessionaires. The remainder will go to the Macau authorities.
Chau was arrested along with 10 other people in November 2021.
Sun setting: The junket operator subsequently ceased all business in Macau in December 2021 and Chau stepped down as chairman. The junket business has been one of the casualties of the Macau downturn as the Chinese authorities looked to crack down on cross-border money flows.
In the chiller: Asian Gaming expert Ben Lee from IGamiX told the FT the prosecution of Chau and fellow junket operator Levo Chan of the Tak Chun Group “sends a chilling reminder to the gaming industry that no one is above reproach”.
Suncity was also at the centre of an Australian enquiry into the activities of Star Entertainment last year, which revealed a number of money-laundering offences related to junket activities.
Bounce: The team at Wells Fargo suggested the first-week visitation data is tracking higher than Street estimates. GGR is still running well below 2019 levels (~39% in week one) but this is above EBITDA expectations for LVS and Wynn Macau, the team added.
Still, in Q4 gaming revenue fell 45% YoY to $1.29bn, according to the DICJ.
New Jersey December
Land-based, sports betting and iCasino all enjoyed an uplift in GGR in December.
Dough boys: Casino gaming saw revenues rise 1.8% to $213.9m, while by the same metric sports betting was up 48% YoY to $87.7m and iCasino rose 14% to $152m. The sports-betting figure was despite handle falling 17% to $1.04bn, which was the eighth straight month of declines.
Deutsche Bank analysts reiterated this likely related to the scaling back of promotions and the impact of New York launching mobile sports betting.
🎢 New Jersey’s eight months of handle declines plotted
The team suggests there will be a step change for OSB, while the Las Vegas calendar looks packed.
Step on: The sports-betting operators will benefit from a pincer movement in 2023 as high hold driven by same-game parlays and cash-out coincides with lower promotional spend, according to Macquarie. This is without any further new legislation, which would be a “major catalyst”.
Driver: Macquarie priced the industry-wide hold benefit at ~100bps, which it suggested will create ~1.4kbps of additional GGR growth.
In terms of competition, the team suggested they “subscribe to the early-mover or golden-cohort view and don’t expect new entrants to significantly alter market share”.
As detailed in yesterday’s Due Diligence, others believe Fanatics poses the challenge to the market shares at the top of the sector since it opened in 2018.
Oops upside your head: On the profit side, Macquarie believed improved tech, better cost containment and reduced media commitments “could lead to bottomline upside surprises”, which, it added, was “elusive” last year.
Going to a party: The team also believed Las Vegas will see revenues come in ahead of consensus, driven by increased group business and by a packed sports and entertainment calendar. The team also thought international demand has been “underestimated”.
Wynn Resorts: Looking at their “contrarian” stance, the team at CBRE said their recommendation is to “double down” in 2023, saying Wynn “checks on the boxes” on their affinity for “levered equities with stable cash flow, efficient access to capital and an improving fundamental outlook”.
They pointed out that the $1.7bn sale-and-leaseback of the Encore Boston Harbor property offers ample liquidity for any near-term debt maturities.
Boyd: Credit Suisse has suggested there are undervalued drivers of growth, including more to come from Downtown Las Vegas following Boyd’s investment in its Fremont Street property.
The team also believed the mid-2023 move to the Pala Interactive platform for Boyd’s Stardust offering (away from FanDuel) will enable it to capture “100% of the economics”.
Churchill Downs: The hitherto “under-the-radar concept” of historical horse-racing machines has been underappreciated, suggested JMP, with growth hitting 68% CAGR since 2019. They noted that the group is one of the only large-scale operators in the space.
Downloads: JMP said app downloads rose 9% YoY for the first week of NFL playoffs for the operators that control ~90% of the online market share, the team noted this was against a tough comp, with New York launching online sports betting this month last year.
Tony, Toni, Toné: The UK Gambling Commission has issued another fine, this time to TonyBet after investigators found it guilty of failing to have fair and transparent terms and failing to follow social responsibility and anti-money laundering rules.
This £442k fine follows the £338k regulatory settlement announced yesterday with BetConstruct’s B2C arm Vivaro, which operates the Vbet.com brand. That similarly found failings in Vivaro Limited’s processes aimed at preventing money laundering and safer gambling.
Greentube has acquired a controlling stake in iGaming management system provider Alteatec for an undisclosed amount.
Operator and platform supplier SkillOnNet has completed a strategic investment in independent game studio Peter & Sons. Financial terms were not disclosed.
Earnings in brief
STS: Revenue for 2022 rose 17% to PLN663m, while NGR in Q4 came in at PLN200m. The company said that in order to focus on the Polish market this year it would phase out its activities in the UK and Estonia.
Massachusetts casino GGR was up 8% to $103.2m, while Tennessee’s sports-betting GGR rose 186.4% to $47m, with handle rising 29% to $440.4m
GAN has gone live with OSB and iCasino in Mexico with its B2C brand Coolbet. As required by local regulations, the group partnered with a locally licensed operator but did not reveal their name.
Inspired: Brooks Pierce is the new CEO of Inspired Entertainment, having previously held the position of COO , while Lorne Weil remains as chairman.
Esports Entertainment: Ex-CEO Grant Johnson is suing the company for breach of contract and wrongful termination. He is claiming accusations from Esports of fraud, wilful misconduct and gross negligence are false.
Horse/bolted: Genesis Global’s license has been suspended by the Malta Gaming Authority following its December announcement that it would file for bankruptcy protection.
Betting content publisher Tallysight will supply its editorial, publishing and monetization services to The Athletic’s sports fantasy and betting teams.
Jan 19: Kambi Capital Markets Day
Jan 26: Rank FY
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